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San José State University Department of Economics |
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| applet-magic.com Thayer Watkins Silicon Valley & Tornado Alley USA |
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Alfred Weber formulated a theory of industrial location in which an industry is located where the transportation costs of raw materials and final product is a minimum. He singled out two special cases. In one the weight of the final product is less than the weight of the raw material going into making the product. This is the weight losing case. In the other the final product is heavier than the raw material that require transport. Usually this is a case of some ubiquitous (everywhere available) raw material such as water being incorporated into the product. This is called the weight-gaining case.
Figure 1 shows the situation in which the processing plant is located somewhere between the source and the market. The increase in transport cost to the left of the processing plant is the cost of transporting the raw material from its source. The rise in the transportation cost to the right of the processing plant is the cost of transporting the final product. Note the line on the left of the processing plant has a steeper slope than the one on the right.
Figure 2 shows the situation if the processing plant is moved closer to the source of raw material. Note that the transport cost of the final product delivered to the market is lower than in the previous location.
The transportation cost for the product delivered to the market will be lowest of all if the processing plant is located at the source of the raw material, as shown in Figure 3.
The weight gaining case is illustrated in Figures 4, 5 and 6. The optimal location of the processing plant in this case is at the market.
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